Throughout the 21st century, economic stability has become dependent on ever-growing sovereign debt.
This dependence, notably in the United States (charted here), accelerated in 2008 and again in 2020. These featured charts summarize why I am focused on this issue, given the clear divergence.
This site examines the nature and consequences of this economic environment in further detail, with a focus on sovereign debt. It is my primary interest right now.
Read the articles below ↓
Switch between the two charts:
Data: FRED. Made in Python with Claude. The response of the US primary balance to lagged debt (g), estimated separately for FY1950–1974, 1975–2000 and 2001–2025 in a single regression, controlling for the output gap and COVID. Following Bohn (1998), g > 0 means primary surpluses rise with debt, a sufficient condition for sustainability. Bars are 95% confidence intervals.
A single OLS regression over FY1950–2025: PBt = αk + β·Gapt + Σ gk·(Dt−1 × Ek,t) + δ·Covidt + εt, where Ek equals 1 in era k (FY1950–1974, 1975–2000, 2001–2025) and 0 otherwise.
PB is the primary balance and D is debt held by the public, both in % of GDP. Gap is the output gap against CBO potential GDP, and Covid is a FY2020–21 dummy. Each era has its own intercept αk, so gk measures the debt response within that era, while β and δ are shared across eras. Intervals use Newey-West (HAC, 2 lags) standard errors.
Data: FRED. Made in Python with Claude. The same debt response (g), re-estimated over each 30-year window and plotted at the window's final fiscal year, controlling for the output gap and COVID. Below zero, primary surpluses no longer rise with debt. Shading is the 95% confidence interval; the lower panel shows the annual output gap. Latest window, FY1996–2025: g = −0.067 (p = 0.004).
Each point is an OLS estimate of PBt = α + β·Gapt + g·Dt−1 + δ·Covidt + εt over the 30 fiscal years ending in that year, using data from FY1950–2025.
PB is the primary balance (federal surplus plus interest outlays, % of GDP), D is debt held by the public (% of GDP), Gap = 100 × (real GDP − CBO potential GDP) / potential GDP, and Covid is a FY2020–21 dummy. Following Bohn (1998), g > 0 means primary surpluses rise with debt, a sufficient condition for sustainability. Intervals use Newey-West (HAC, 2 lags) standard errors.
"Unless we think of our civilization as something that's going to stretch out into the future, we won't do the job of living well today."
Hyman Minsky
I use AI to code this site and to assist in research, but not to write anything for me. All writing and reasoning is independent. I welcome any attempt to verify or disprove this commitment.
Nothing on this website is financial advice.